28% GST detrimental to the existence of amusement park industry

Mumbai, May 31, 2017: The recently
announced Goods and Services (GST) tax by the Government of India, has put the
very existence of India’s amusement – theme park industry at peril with the
imposition of a mammoth tax rate of 28%. This new taxation regime puts this
industry catering to outdoor entertainment for children, youth and families at
par with the casinos, betting and race courses. It also overlooks the essential
role played by the industry in creating social infrastructure and attracting
tourism.

One year back, in many states, where the tax
rate was 0%, then service tax added to 15% and now with GST
it is 28% which is a huge burden on the industry.

The amusement park industry, which is still
in its budding phase in the country, is
a highly capital-intensive industry and requires significant investment both
Capex on land and rides to the tune of Rs. 700 crores for mega parks and Rs.
100 crores for mid-sized parks and also the Operational Expenditure (Opex).
Furthermore, although being a highly seasonal business, all the parks have to
operate on a full capacity even during off seasons.

In spite of
operating on such thin margins with cumulative revenue of INR 1,700 crore
approximately, the amusement park industry has contributed significantly
towards social infrastructure creation and currently employs around 1.25 lakhs
across India. Realizing the essentiality, it plays in establishing tourist
hubs, more and more states are now keen to host theme parks to attract
increasing number of tourists.

Mr. Shirish Deshpande, President, Indian
Association of Amusement Parks and Industries (IAAPI) & CEO, Pan India
Paryatan Pvt. Ltd., (PIPPL) said, “This is a huge setback
for our industry which in essence puts our very survival at risk. Such high
taxation is out rightly unsustainable for our industry which as it is operates
on a paper-thin margin. Amusement park is not and was never a luxury. It is a
social infrastructure giving outdoor entertainment to children and youth of
tomorrow’s India, who are otherwise glued to gadgets and digital world.
Amusement Parks helps foster bonding with family and friends, relieves stress
and provides rush of adrenaline and more. It has a direct correlation with the
development of tourism in any state and plays a major role in creating
employment both directly and through ancillary and other related industries. In
view of this, as a representative of the industry, we would like to urge the
government to consider our standpoint and treat the industry in line with
hospitality and restaurants which fall in the GST slab of 12%-18%, on top of it
this industry does not consume major raw materials and input credit is not more
than 2-3% therefore it makes amusement industry unviable to sustain such high
GST rate.”

Globally, in markets where ever GST has been
introduced, tourism rate has been kept half of the GST rate and in most cases,
it is under 10%. The GST rate in
Australia is 10%, Singapore is 7%, Japan 5% , Malaysia 6%. This on one hand
stimulates tourism demand and on the other creates an economic multiplier
effect on GDP thereby creating business opportunities across multiple sectors
such as hospitality, food & beverage, transport among others.

Mr. Rajeev
Jalnapurkar, CEO, Ramoji Filmcity said, “Imposing such high rates of taxation is
detrimental to the prospects of our business making it unviable besides putting
thousands of jobs at stake. The amusement park industry is still at its nascent
stage and requires significant support from the government’s end to make the
industry flourish in its full dynamism. We strongly advocate the government to
rethink on its decision and support our industry by bringing it under the aegis
of the tourism industry.”

Such a high tax rate
will not only hamper the current Amusement Park industry but will be deterrent
to new entrants in this industry.